Having lived in Philadelphia for a while, one thing I learned was that not all Philly cheesesteaks are made equal. Aficionados can debate whether Pat's, Geno's, or Jim's does it best, but one thing is for sure -- a cheesesteak outside Philly is nothing more than a steak sandwich.

In a similar way, investors looking to lock down some dividend income for their portfolio need to be aware that not all dividends are equally tasty. Yesterday, I took a look at a few dividend payers that I think could cause indigestion for investors down the road.

Fortunately, though, right now it's not nearly as hard to find a good dividend-paying stock as it is to find a good cheesesteak outside the Philadelphia city limits.

The right ingredients
A cheesesteak is built on a pretty simple foundation -- chopped beef, fried onions, Cheez Whiz (OK, you can do provy if you want), and, of course, an Amoroso roll. Bring those together in just the right way and what you have is greasy gastronomic gratification.

The basic building blocks of a dividend delight aren't overly complex either -- we're looking for a good underlying business, a history of reliable payouts, a reasonable current yield, room to grow the yield further, and a strong balance sheet. Bring these together just right and you'll have a stock worth hanging on to. And unlike the cheesesteak, dividend stocks don't bring you closer to a coronary.

OK, enough with the greasy sandwiches, I can hear your stomach grumbling.

Yesterday, I picked apart three companies with high debt yields, potentially unsustainable payout ratios, debt-heavy balance sheets, and little or no growth in dividend payouts. Today, I looked for the exact opposite.

Dividends worth dining on
Right now, I think there are quite a number of dividend-paying stocks investors could do well with. But here are seven currently on my radar.


Current Yield

Payout Ratio

Debt to Equity

Five-Year Dividend CAGR

ExxonMobil (NYSE: XOM)





Illinois Tool Works (NYSE: ITW)





The Home Depot (NYSE: HD)





Aflac (NYSE: AFL)





Walgreen (NYSE: WAG)





Owens & Minor (NYSE: OMI)





Alliance Resource Partners (Nasdaq: ARLP)





Source: Capital IQ, a division of Standard & Poor's. CAGR = compound annual growth rate.

Some investors attracted to dividends might be disappointed at the relatively low yields from most of the stocks on this list. To be sure, you can find heftier yields out there that are sustainable. However, I generally like my dividend investments to be well-rounded -- that means payout growth along with the current yield.

Looking a bit closer, I tried to spread the group over a variety of industries, but it's tough not to notice the plethora of dividend opportunities in the energy sector. I ended up taking two from that industry, but the two -- Exxon and Alliance Resource -- give somewhat different exposure. Exxon, as most of us know, is the global oil major among global oil majors. Alliance Resource, meanwhile, is a limited partnership focused on the coal industry.

Earlier this week, my fellow Fool David Meier highlighted both of these companies while musing over the market commentary from Legg Mason guru Bill Miller. In the commentary, Miller scratched his head over investors passing up what he sees as very attractive potential returns from Exxon -- thanks to the dividend yield, dividend growth, and share buybacks -- in favor of bonds. For his part, David trolled the market looking for other stocks that could offer an Exxon-like opportunity and he came up with ... you guessed it … Alliance Resource.

Illinois Tool Works is a diversified industrial manufacturer with 840 operating units that produces everything from putty for auto-body repair to cooking equipment, electronic components, and laminate flooring. But while the company's operations may not be terribly exciting, its financial performance -- and in particular the growth and reliability of its dividend -- should be enough to quicken the pulse of any income-oriented investor.

Some may think it a little nutty to even consider Home Depot, but I think better times could be ahead for the DIY giant. The housing market is in tatters, but a variety of factors -- including people picking up cheap, but worn, foreclosed properties -- may start bringing people back to Home Depot. Potentially more interesting is what's going on inside the company -- new CEO Frank Blake is helping this one-time growth favorite find a more mature trajectory. And that likely bodes well for future dividends.

Rounding out the group in one fell swoop: Though Aflac, Walgreen, and Owens & Minor are in very different businesses, it's health care that ties them all together. Put simply, though there are still lingering uncertainties around health-care reform, this is one of the few sectors investors can depend on right now. So why wouldn't we like strong, dependable dividend payers within a still-performing sector? Yeah, I can't answer that, either.

I have my eye on all seven of these stocks through my personal watch list, but I'm never shy about adding to the list. Head down to the comments section and let me know what other dividend stocks I should be watching. Don't have a recommendation? Well then head down and tell me who makes the best cheesesteak!

Popularity isn't high on my list when picking stocks, but this dividend payer has popularity in spades and a yield that's through the roof.

Home Depot is a Motley Fool Inside Value pick. AFLAC is a Motley Fool Stock Advisor recommendation. Alliance Resource Partners LP is a Motley Fool Income Investor pick. The Fool owns shares of Legg Mason. Try any of our Foolish newsletters today, free for 30 days.

Fool contributor Matt Koppenheffer does not own shares of any of the companies mentioned. You can check out what Matt is keeping an eye on by visiting his CAPS portfolio, or you can follow Matt on Twitter @KoppTheFool or on his RSS feed. The Fool's disclosure policy assures you no Wookies were harmed in the making of this article.